The idea of getting 'free' silver sounds ludicrous, especially
given surging demand for the precious metal. But I've found a small
mining company producing free silver for investors now that it's
gone from silver explorer to silver producer.
This Canadian company's stock shows every sign of running higher
along with the precious metal, yet it remains a good value despite
a strong post-recession rebound over the past year.
The company is
Alexco Resource (AMEX: AXU, TSX: AXR.TO),
which engages in the exploration and development of mineral
properties in Canada's Yukon Territory.Alexco Resource's stock
finished 2010 with a 118 percent gain and has almost risen another
10 percent this year.
Alexco Resource was founded in 2005 by a management team with
decades of experience in the mining industry. Shares of the
Vancouver-based company, which has a market cap of $520 million,
have traded on the Toronto exchange since 2006 and on the AMEX
exchange since 2007.
***All indications are that Alexco will turn profitable in the
fiscal year that ends in June, which should help green light the
stock in many investors' minds.
The company's exploration has thus far been centered on its
holdings in the Yukon's Keno Hill Silver District where it began to
accumulate land in 2006. Rated at 40 ounces per ton, Keno Hill is
historically one of the richest silver production districts in the
From 1941 to 1989, the Keno Hill district delivered more than
217 million ounces of silver, with average grades of 40.5 ounces
per ton of silver, 5.6 percent lead and 3.1 percent zinc.
Production was halted in 1989 because of rising costs and low
Commercial production began at the company's Bellekeno mine on
January 1, and is the mine appears ready to release its wealth to
today's improved, more cost-effective technologies.
The company's production plans indicate that Alexco Resource
will deliver 2.8 million ounces of silver in 2011. It projects this
will increase to 5 million ounces by 2013, and to 7 to 10 million
ounces by 2015.
***So how can Alexco Resource deliver 'free' silver? This is
possible because Bellekeno produces two metals typically found with
silver - lead and zinc. As gold and silver have drawn most of the
attention due to rising prices, other less glamorous non-precious
metals, including lead and zinc, also have marched higher.
In addition to its silver lode, Alexco projects that it will
produce 18 million pounds of lead and 8 million pounds of zinc from
the mine this year. At spot market prices of around $1.10 and $1.25
per pound, respectively, production of those metals should pay for
ALL mining costs.
And therefore, the silver coming up becomes 'free' - produced at
a negative cash cost. While lead and zinc pay the freight, the
silver is all profit. If Alexco Resource reaches 7 million ounces
of silver output a year, the company will have a tremendous cash
***Interestingly, Alexco Resource also has another
mining-related business - restoring mine sites and other
brownfields environmental eyesores by returning the land and water
to the way they were pre-mining. So it cleans up after itself, and
even cleans up any messes that other less conscientious outfits
have left behind.
The company is sitting on $46.1 million in cash, thanks to a
refinancing move made in 2010, and it also has no long-term debt on
Rising silver prices continue to present profitable
opportunities for investors, but Alexco Resource isn't the only
company that I've discovered. In fact, I've prepared
a free special report that I'd like to share with
you by clicking here.
It covers another small mining company that's sitting on silver
worth billions of dollars.